Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 116.778 | EURUSD 1.12081 | AUDUSD 0.72004 | NZDUSD 0.67374 | USDCAD 1.37533 | USDCHF 0.99323 | GBPUSD 1.45896 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               116.99 | 116.55

EUR/USD             1.1216 | 1.1186

EUR/JPY               131.025 | 130.565

AUD/USD            0.7211 | 0.7172

NZD/USD             0.6738 | 0.6685

USD/CAD             1.3759 | 1.3722

EUR/CHF              1.11305 | 1.1123

USD/CHF             0.9941 | 0.9920

GBP/USD             1.4592 | 1.4561

EUR/GBP             0.76905 | 0.7680

 

For Today

• EUR: A quiet session with the euro trading in a narrow band around the 1.1200 levels, Tokyo bought lightly to make the highs towards the 1.1220 levels before drifting lower and testing the 1.1190 levels repeatedly but with a lack of intent. Topside offers through the 1.1240 levels and likely to find offers continuing through te 1.1260 level, even through that level the market is possibly still likely to continue in the same vein with only a push through the 1.1320 level with the market to the topside then opening to a push to the 1.1500 areas that is only if the current situation continues and everything that the ECB say is treated lightly and what the Fed says is listened too. Downside bids light through to the 1.1000 levels and likely to be a little stronger however the main levels are not to be found until below there and into the 1.0960 areas, however, at that point the movement could be too strong and the market open to a deeper move.
• GBP: Cable opened a little lower and then moved sideways into the Tokyo session before slowly slipping from the central 1.4580 levels to test through the 1.4560 areas and into the grey hours, Topside offers few and far between until the 1.4650 areas and through the level and into the 1.4700 areas likely to find stronger offers, a drive through the level would be against the current fundamentals for the UK but given everyone is in the same boat a move could see the 1.4800 levels tested and the opening to further gains back through the 1.5000 areas in the long term, downside is possibly weaker with very light bids through the 1.4500 levels and only improving on a move back to the 1.4450 areas with the market likely to break down on a move through the 1.4400 levels.
• JPY: A quiet session with the market in USDJPY unable to push through the 116.60 levels with any consistency and the market moved back from the level to push towards the 117.00 levels late into the session towards the grey hours, Topside offers light through the 117.00-20 areas and the possibility of weak stops on a move through the 117.30 areas and the market opens for a move back to the 118.00 levels, of course this is all dependent on the NFP numbers for today, which obviously goes someway to explain the quietness of the market, however, low expectations for the number would suggest that the market is beginning to believe its own misforgiving, downside bids into the 116.60 levels are then likely to give way to sustained weakness and the market is open to a test into the 116.00 level again with a break here opening the downside for at least a further big figure.
• AUD: The move into the Tokyo session saw a light rise to test the 0.7210 levels however, the market was very quiet overall and having tested the level dropped back quickly and then spent the rest of the session trading the 0.7180-90 levels to the grey hours the fact that there was no downgrade on inflationary forecasts considering the plunge in oil seemed a little offbeat. Topside offers increase as the market approaches the 0.7240 levels and the offers are likely to continue through to the 0.7260 levels before any weakness appears, from there though the approach to the 73 cent level is likely to be about grinding through the offers and it is likely to be a gradual movement. Downside bids light into the 0.7160 areas and while the market sees bids down through the level and into the 0.7130-20 areas before weakness and light stops are likely to appear in the market and the 70 cent level opens quickly.

Overnight News

USD:

Fed’s Mester Says She’s ‘Sceptical’ of Negative Rates in U.S.

Mester Says Gradual Tightening Is Appropriate Fed Policy Path

Portman Says He’s Disappointed by TPP Signing, Won’t Support It

JPY:

Abe: Pension Fund Results Not Directly Tied to Nikkei 225 Drop

Aso: Can’t Comment on Effect of Negative Rate on JGB Market

Japan Pension Fund Barred From Direct Stock Buying: Kyodo

Magnitude 4.6 Earthquake Hits Near Tokyo; No Tsunami Threat

Kuroda Avoiding Currency War to Cap Yen Loss, Ex-MOF Utsumi Says

AUD:

RBA: GDP, CPI Forecasts Little Changed; China a Key Uncertainty

Australian Dec. Retail Sales Unchanged M/M; Est. 0.4% Gain

Australia’s Jan. Construction Index Falls 0.5 Pt M/m to 46.3

GBP:

BOE’s Broadbent Says No Great Urgency to Raise Interest Rates

U.K. LFL Sales Rose 1.4% in Jan., Helped by Sales, BDO Says
Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

AUD       Retail Sales M/M Dec A 0.00% | C 0.40% | P 0.40%

AUD       RBA Statement on Monetary Policy

JPY         Leading Index Dec (P) A 102 | C 102.8 | P 103.5

07:00     EUR        German Factory Orders M/M Dec C -0.40% | P 1.50%

08:00     CHF        Foreign Currency Reserves Jan P 560B

13:30     USD       Trade Balance Dec C -42.8B | P -$42.37b

13:30     USD       Change in Non-farm Payrolls Jan C 192K | P 292k

13:30     USD       Unemployment Rate Jan C 5.00% | P 5.00%

13:30     USD       Average Hourly Earnings M/M Jan C 0.30% | P 0.00%

13:30     CAD       Trade Balance (CAD) Dec P -2.0B

13:30     CAD       Net Change in Employment Jan P 22.8k

13:30     CAD       Unemployment Rate Jan P 7.10%

15:00     CAD       Ivey PMI Jan C 50.3 | P 49.9

Harry Hindsight              

• EUR: Asia traded in a reasonably quiet range with the market opening around the 1.1100 and seeing quick but light selling moving in to test the 1.1080 levels before the opening in Tokyo which then reversed the losses and attempted to push through the 1.1120 areas but failing and again dipping back towards the lows and the trading around the 1.1080 levels into the London session with the grey hours testing to the 1.1070 levels before the London opening. The opening saw immediate strength appearing and the market pushing from the lows and straight through the day’s highs triggering weak stops on the move through the 1.1130 levels and pausing around the 1.1160 level before ignoring the weaker retail PMI and from that point the market had a mind of its own as it continued a steady rise through the 1.1200 levels and continuing to the 1.1240 level before running out of steam and into the US data releases, with weaker numbers for jobs and higher wage costs beginning to appear the USD continued to look week but EURGBP buying containing the market for the most part, with the drift lower unable to pass back through the 1.1150 levels and again pushing above the 1.1200 levels and a narrow range through to the close. ECB economic bulletin had little effect on the market with one CB after another using the same strategy of “forward guidance” to weaken its own currency now beginning to be seen for what it is and all talk with little substance and the Euro will now require further easing, something the German BuBa likely to be against.
• GBP: A light drift lower through the Asian shift moving from the 1.4600 and gradually slipping to the 1.4570 into the London opening, as with the Euro with USD offered in early trading the Cable rose quickly to above the 1.4660 areas and held into the NYK session around the 1.4650 areas however, while the BoE’s decision was as always unchanged the MPC vote saw a change with the board voting as one for the hold and Cable dropped back quickly to test the 1.4530 areas before bouncing quickly through to the 1.4670 areas as the market became extremely choppy into the NYK session, EURGBP gained through to test the 77 pence level before steadying to hold around the 0.76900 levels to the close, and Cable slipped from the highs to hold around the 1.4600 levels and finish the day just below the levels and more or less unchanged for the day.
• JPY: USDJPY found itself under pressure again and the market having opened around the 118.00 levels moved through the Asian session trading around that level with minor dips to the 117.70 areas and the market only started to really drift lower into the London session with the opening hour seeing the market dip to the 117.40 levels and the hold into the NYK session, from the opening in NYK sellers again appeared and the market slipped steadily through to the 117.00 levels with plenty of two way flow moving in to hold the market for a time before pushing to the 116.60 levels and triggering some light stops however, the market found substantial bids into the level and the market was unable to break through and finished just off the lows into the close.
• AUD: Overall a quiet day for the Oz with the movement higher more to do with the USD weakness and the market holding in the AUDJPY carry trade holding the 84/85 Oz level, the move through to the London session seeing stronger buying move in for the Oz to test through the 72 cent levels and into the NYK session pushing to the 0.7240 levels before slipping back to trade around the 72 cent level to the close,

Yesterday’s premiership results

AUD       NAB Business Confidence A 4 | C 0 | P 1

CHF        SECO Consumer Confidence Jan A -14 | C -15 | P -18

EUR        Eurozone Retail PMI Jan A 48.9 | P 49

GBP       BoE Rate Decision A 0.50% | C 0.50% | P 0.50%

GBP       BoE Asset Purchase Target A 375B | C 375B | P 375B

GBP       MPC Official Bank Rate Votes A 0–0—9 | C 1–0-8 | P 1–0-8

GBP       MPC Asset Purchase Facility Votes A 0–0—9 | C 0–0—9 | P 0–0–9

GBP       BoE Inflation Report

USD       Challenger Job Cuts Y/Y Jan A 41.60% | P -27.60%

USD       Non-Farm Productivity Q4 (P) A -3.00% | C -1.40% | P 2.20%

USD       Unit Labour Costs Q4 (P) A 4.50% | C 3.90% | P 1.80%

USD       Initial Jobless Claims (JAN 30) A 285K | C 286K | P 278K | R 277K

USD       Factory Orders Dec A -2.90% | C -2.00% | P -0.20%

Good Luck,

Andy

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